Standard Chartered eyeing SMEs

By Leah B. del Castillo

Special Projects Editor

A TOP official of the international bank Standard Chartered on Thursday said it may venture into SME banking in the Philippines if the much-awaited credit bureau were to be finally set up. In a gathering with editors in Makati City on Thursday, Standard Chartered Philippines chief executive officer Eugene Ellis said the London-based bank would tap small and medium-sized enterprises as a market for their products “only after the credit bureau is up and running.” A credit bureau provides lending institutions with information on the creditworthiness and credit history of specific consumers and businesses that intend to borrow monies. The enabling law for the creation of a credit bureau has not taken definite shape at the country’s legislature, with the two houses of Congress approving different versions of the bill—and divergent provisions on the ownership structure of the credit bureau. The legislature has gone on recess, and will resume sessions in June this year. At present, Standard Chartered is engaged in three businesses in the Philippines—credit cards, personal loans and mortgages. The Bangko Sentral ng Pilipinas has supported the creation of a centralized credit bureau, as it protects the financial system from fraud and promotes credit discipline. In turn, banks are able to make better decisions on loan approvals. “With a credit bureau, there would be less bad debts,” said Ellis. In addition, the Standard Chartered executive said that another advantage of having available information from a credit bureau is that lenders would be able to give different rates to different borrowers, based on their creditworthiness. He explained that under the current set-up, borrowers—often regardless of their paying capacity and credit history—pay the same rates for their loans. In the last Treasury bills auction on March 5, the 91-day T-bill which banks typically use as a benchmark for their lending closed at 2.935 percent. These days, many banks impose a minimum of close to 2-percent interest on personal loans, and some 11 percent to 15 percent-interest on home mortgages.  Ellis stressed that SMEs would actually do better if actual SME lending were available to them. What usually happens to start-up entrepreneurs in the country, he said, is that they use their personal credit cards and avail themselves of personal loans in order to finance their businesses. “SMEs need working capital,” he said. For them to avail themselves of “straight loans is a mistake.” Aside from personal loans not being cost-effective in funding a business, Ellis said that in the unfortunate event of default or delinquency, litigation of unpaid loans is around 22 percent of the actual value of the loan.

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